Day Trading OPM
Day trading involves the strict following of market trends from the time the stock markets up in the morning until it closes later in the day. For day traders working standard market hours, the 7 hour trading session is all that they need to buy and sell stock and, hopefully, make some money in the process.
Is day trading shady? Well, it can be. Some day trading pros use plenty of OPM to make transactions. What is OPM? I am glad you asked. Please read on for a definition and how it is used.
OPM stands for Other People's Money and it is, like the drug opium, something that can be truly addictive. OPM are funds that really do not belong to the day trading pro, instead they are funds garnered to conduct trades including:
Cash Advances - That $5000 cash advance with your MasterCard or VISA is just sitting there. Some cash strapped day trading pros tap that available line of credit and buy and sell stocks.
It isn't a lot of money, but borrowing $5000 involves paying a cash advance fee and at least one day's interest payment provided the day trading pro pays it back right away. If he doesn't the interest payments will accumulate usually to the tune of 20% per annum or more!
Home Equity - Home equity loans or home equity lines of credit are substantially larger than credit card cash advances and a source of temptation for the careless day trading professional. It is easy to take $50,000 set aside for home improvements and use that money to gamble on the stock market.
Chances are the day trader will be successful, but then the chances remain he will not. Will the trader replenish the withdrawn funds immediately or use his winnings to seek other day trading opportunities?
Family Loans - If you are approached by a day trading pro who happens to be a close relation don't give in to his request to borrow money. Chances are the funds will go toward flipping stock. At this point in the game, the day trading pro is more of an addict than a professional. Don't feed into his addiction by supplying needed cash to him.
Like opium, OPM is addictive and dangerous. Don't encourage the addict's condition and certainly do what you can do encourage him from making additional foolish choices. You may not have the cure, but you certainly don't have to feed the monster.
Is day trading shady? Well, it can be. Some day trading pros use plenty of OPM to make transactions. What is OPM? I am glad you asked. Please read on for a definition and how it is used.
OPM stands for Other People's Money and it is, like the drug opium, something that can be truly addictive. OPM are funds that really do not belong to the day trading pro, instead they are funds garnered to conduct trades including:
Cash Advances - That $5000 cash advance with your MasterCard or VISA is just sitting there. Some cash strapped day trading pros tap that available line of credit and buy and sell stocks.
It isn't a lot of money, but borrowing $5000 involves paying a cash advance fee and at least one day's interest payment provided the day trading pro pays it back right away. If he doesn't the interest payments will accumulate usually to the tune of 20% per annum or more!
Home Equity - Home equity loans or home equity lines of credit are substantially larger than credit card cash advances and a source of temptation for the careless day trading professional. It is easy to take $50,000 set aside for home improvements and use that money to gamble on the stock market.
Chances are the day trader will be successful, but then the chances remain he will not. Will the trader replenish the withdrawn funds immediately or use his winnings to seek other day trading opportunities?
Family Loans - If you are approached by a day trading pro who happens to be a close relation don't give in to his request to borrow money. Chances are the funds will go toward flipping stock. At this point in the game, the day trading pro is more of an addict than a professional. Don't feed into his addiction by supplying needed cash to him.
Like opium, OPM is addictive and dangerous. Don't encourage the addict's condition and certainly do what you can do encourage him from making additional foolish choices. You may not have the cure, but you certainly don't have to feed the monster.